Recruitment needs to evolve for startups. Here’s why.
Technology can help businesses automate the heavy lifting of recruiting and let hiring managers do what they do best: close the best candidates.
Talent acquisition matters, and at a startup, it really matters. The level of importance translates more or less directly into the time that startups need to dedicate to recruitment, and time is a commodity that they do not have in abundance.
So what is the solution? For decades the solution has been to outsource the process to external recruitment agencies. At its core, this industry has remained relatively unchanged over a long period of time; and why would it change? Headhunters have helped companies find talent, and in return for their highly valued, help they have been operating at hefty margins.
Related: How to build an inclusive recruitment process
However, in today’s digitally driven world, one can question why technology has yet to streamline this process in a way that largely benefits a startup’s bottom line even more so. It’s certainly a viable solution, as the use of technology can help businesses automate the heavy lifting of the recruitment process and let hiring managers do what they do best: close the best candidates.
Where should startups begin?
When looking at how a typical headhunting firm operates, it can usually be split in six stages: advisory, market research, candidate identification, pre-screening, candidate development (“selling the job”) and closing. A typical recruitment agency (“headhunter”) will charge 15-30% of a hire’s first-year salary for this service, meaning that the cost even for a mid-level hire is likely to run to +$25k.
When startups look to identify candidates, solid market research and candidate identification from headhunters is an incredible perk, and lifting this off the shoulders of time-strapped startups is therefore absolutely a value-add. That said, in reality, this high-value service is often performed by junior recruiters, which means that only a small portion of the 15-30% fee goes to this process. As such, if a startup’s main reason to go with a headhunter is to offload the heavy lifting, they may be paying much more than they think compared to the input for that particular part of the process.
Additionally, hiring with an agency can be a lengthy process, and in many cases, it takes at least three months from start to hire. Headhunting was originally designed with corporates in mind and for a large organization with red tape and bureaucracy, three months is not too long of a lead time to add a full-time employee. This means that the process is rarely optimized for speed, and for an early-stage startup, three months can seem like a lifetime to wait to add a high impact individual to the team.
The next stage of the process, pre-screening, involves recruiters interviewing candidates before passing them on to their client. Interviews are conducted by external recruiters who, despite best effort, are unlikely to have as intimate an understanding of the company as an insider. Pre-screening interview judgment therefore relies to a large extent on keywords rather than the more intricate signals that someone on the inside might be able to pick up. An insider at the company can draw on a deep understanding of the company, culture and role when assessing candidates, which is extremely difficult to emulate. From a candidate’s perspective, an insider is also able to sell the role in a way that only an insider can.
That said, today’s startups value transparency from their partners. Being kept out of the process until the later stages of the candidate evaluation process limits a startup’s ability to impact the narrative and tell their own story to a larger group of potential candidates through earlier stages of the process.
Can technology be the saving grace?
The talent space has seen plenty of change in recent years. Active job-seeking was revolutionized by the likes of Indeed and LinkedIn, the hiring process has been improved by ATS providers like Greenhouse and Lever, and now it is surely the time for the search industry to be disrupted as well. To summarize, this is what needs fixing: Cost, timing and information imbalance.
The cost issue is the big one. Cost reduction is also where technology can be a powerhouse of change by minimizing human interaction and streamlining workflows. Artificial intelligence and machine learning can cut down sourcing time by sifting through huge amounts of data, e.g. across public sources. This can lower recruitment costs in two ways: 1) Narrowing down huge fields of candidates limits the need to outsource the process and 2) recruiters can use this technology and pass savings on to clients. Arguably technology’s ability to assess team fit may be limited, however, several solutions are already helping companies narrow the field and cut the time to hire. This is also a plus for candidates tired of being inundated with messages about ill-suited jobs.
Information imbalance causes issues on two fronts: 1) Clients often don’t know what goes on during the headhunter’s process and 2) recruiters will inevitably have a less intimate understanding of the inner workings of a company than an insider. Starting with the former, there are a plethora of ways that technology can increase transparency. Features from collaboration tools in e.g. project management (ie. Monday.com) and design (ie. Figma) can be applied to recruitment in powerful effect.
Now onto the insider-view. This is where technology falls short. The most effective fix is in reality to bring all interviewing in-house. Rather than focusing on how one might fix the information imbalance between recruiters and clients, when it comes to the intricacies of culture and the role, the fix should be focused on how to make the interview process for startups as pain-free as possible.
Let’s go for disruptive, rather than gradual, change
While search firms can provide immense value to startups through contacts and expertise, the industry has in many cases not adapted to the startup space. Slow change has defined the industry for long. While technology can and is fixing individual aspects of the process, the way forward is likely to holistically rethink how recruitment for startups and leverage technology to disrupt the end-to-end process.
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